The Bureau of Labor Statistics released the April employment situation report on Friday morning showing that the US economy added 138,000 nonfarm payroll jobs last month. The unemployment rate ticked up to 4.3 percent from 4.2 percent in March. The print came in below the consensus forecast of 165,000 that Wall Street economists had penciled in and marks the second consecutive month that hiring has fallen short of expectations. Revisions to the February and March numbers subtracted a combined 42,000 jobs from earlier estimates, deepening the signal that the labor market is decelerating rather than holding steady.
Health care continued to be the workhorse of the report, adding 52,000 jobs, with hospitals and ambulatory services accounting for most of the gain. State and local government added 21,000 positions, largely in education. Leisure and hospitality added 19,000, though that sector remains about 140,000 jobs below its pre-pandemic trend after a rough winter in food service. Professional and business services were flat for the third straight month, and temporary help services lost 14,000 jobs, a category economists watch closely as a leading indicator for white-collar hiring.
Manufacturing shed 9,000 jobs in April, concentrated in auto parts and primary metals. The sector has now lost jobs in five of the last seven months as tariffs on Chinese machinery and ongoing softness in the Iran-related oil price spike have squeezed industrial buyers. Construction held roughly flat, adding 4,000 jobs, as residential building slowed in the Sun Belt while infrastructure work continued in the Northeast. Retail trade lost 11,000 jobs, with department stores and electronics retailers leading the declines.
Average hourly earnings rose 0.2 percent in April and 3.8 percent over the last twelve months, the slowest annual pace since June 2021. That reading will be welcome news at the Federal Reserve, where officials have been looking for wage growth to settle closer to the 3.5 percent range they consider consistent with 2 percent inflation. The average workweek held at 34.3 hours, and the labor force participation rate edged down one tenth to 62.4 percent, a figure that has drifted lower for three consecutive months as older workers retire and prime age participation plateaus.
The Black unemployment rate rose to 6.8 percent from 6.5 percent in March, widening the gap with the white unemployment rate of 3.9 percent. The Hispanic rate moved up to 5.4 percent. Labor economists at the Economic Policy Institute noted that Black workers have historically been the first to feel labor market softening, and the April numbers extend a pattern seen in recent cycles where gains during expansions are given back faster when hiring cools. Teen unemployment rose to 13.1 percent.
Markets had a muted reaction to the report. The two-year Treasury yield fell 4 basis points to 4.02 percent, and fed funds futures moved to price in a full rate cut at the June meeting, up from roughly 70 percent odds before the release. The S&P 500 opened modestly higher. Federal Reserve Chair Jerome Powell is scheduled to speak Tuesday at the Economic Club of New York, and analysts expect him to acknowledge the softer data while reiterating that the Fed will remain data dependent given the still unresolved Iran situation and its effect on energy prices.
Treasury Secretary Scott Bessent issued a statement calling the report consistent with a gradual normalization and pointing to the wage gains as evidence that real incomes continue to rise. House Financial Services Committee Chair Maxine Waters called the report a warning sign and urged the Fed to cut rates at its May meeting rather than wait until June. The National Federation of Independent Business said small business hiring plans fell to their lowest level since August 2024, with 44 percent of owners reporting unfilled positions but fewer planning to add staff in the next three months.
The next employment report is scheduled for release on May 8 and will cover the May reference period, giving the Fed one more data point before its June 17 policy decision.